Verizon's Mammoth Deal Will Set the Tone Until Fed Meeting
Portfolio managers are hoarding their cash balances as they keep powder dry to participate in Verizon's massive upcoming debt issuance following its buyout of Vodafone's wireless stake.
While the average spread in the Morningstar Corporate Bond Index tightened 3 basis points to +147 last week, the corporate bond market did not feel as healthy as the tightening index spread would indicate. Evidence of the skittishness was apparent in both the new issue market and secondary trading. The concessions required to price new issues were unusually wide, and even then, many of these deals traded in the secondary market at or behind where the new bonds were priced.
With interest rates rising and bond prices falling, many traders have been gun-shy about purchasing long-dated bonds and are waiting for rates to even out. In addition, portfolio managers are hoarding their cash balances as they keep their powder dry in order to participate in Verizon Communications' (VZ) (rating: BBB, narrow moat) massive upcoming debt issuance, and they are also dealing with redemptions as individual investors have been pulling money out of fixed-income funds. With the Fed's reduction of quantitative easing looming over the market, potential military intervention in Syria, weakness among emerging-markets economies and currencies, and pending debt ceiling and budget battles in Washington, investors are contending with an unusually wide range of near-term risks.
David Sekera does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.
Transparency is how we protect the integrity of our work and keep empowering investors to achieve their goals and dreams. And we have unwavering standards for how we keep that integrity intact, from our research and data to our policies on content and your personal data.
We’d like to share more about how we work and what drives our day-to-day business.
We sell different types of products and services to both investment professionals and individual investors. These products and services are usually sold through license agreements or subscriptions. Our investment management business generates asset-based fees, which are calculated as a percentage of assets under management. We also sell both admissions and sponsorship packages for our investment conferences and advertising on our websites and newsletters.
How we use your information depends on the product and service that you use and your relationship with us. We may use it to:
To learn more about how we handle and protect your data, visit our privacy center.
Maintaining independence and editorial freedom is essential to our mission of empowering investor success. We provide a platform for our authors to report on investments fairly, accurately, and from the investor’s point of view. We also respect individual opinions––they represent the unvarnished thinking of our people and exacting analysis of our research processes. Our authors can publish views that we may or may not agree with, but they show their work, distinguish facts from opinions, and make sure their analysis is clear and in no way misleading or deceptive.
To further protect the integrity of our editorial content, we keep a strict separation between our sales teams and authors to remove any pressure or influence on our analyses and research.
Read our editorial policy to learn more about our process.